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Sailing in troubled waters

Each year since purchasing a Hunter sailboat from Angus Yachts in 2005, Tom Duke was invited to the Toronto International Boat Show as a guest of the dealership, one of the largest in the country. He was also invited to Angus' annual customer appreciation cocktail party on Saturday nights.

But this year, there's no Angus cocktail party and Duke had to buy tickets to the show, which begins tonight with a charity preview, opens to the public tomorrow at 10 a.m. and continues through Jan. 18.

Angus Yachts, which merged in June with Clift's Marine, Canada's largest yacht brokerage, quietly closed its doors on Dec. 1 after 36 years.

The company had offices in Mississauga, Orillia and Penetanguishene and employed 55 people. In 2005, Angus sold more Hunter sailboats than any other dealer in the world.

In 2006, they started selling powerboats. Last year, they were the largest dealers of Cruisers Yachts in the world. They were about to launch the Prestige line from France.

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"We had huge growth, doubling every year from '03 to '07," says Alan Adelkind, former vice-president of Angus Yachts.

"We were touted all through North America as the darlings of the boat business. We turned down one brand a month."

But by autumn, says Adelkind, it was no longer smooth sailing. Instead, it was "the perfect storm," he says, citing the high Canadian dollar that made boat purchases in the U.S. a bargain, comparison shopping on the Internet, the company's investment in expanded staff and costly service software programs, a swollen inventory of "big huge powerboats," and consumer pessimism about the economy.

Mainly, he explains, "We grew too fast. We were spending huge dollars but not taking in enough to keep the thing going.

"I would say our profitability went down some whopping percentage, probably 20 or 25 per cent."

For years, Angus and Clift's were major players at the Toronto International Boat Show and many of the 85,000 people expected to attend the show this year will wonder why they're missing.

As late as yesterday, the Angus website, angusyachts.com, was still boasting that the merged company is "one of the largest pre-owned yacht sales operations in North America."

Angus took over Clift's seven months after the death of its president and owner, David de Eyre, in November 2007.

But while the shuttering of Angus and Clift's may be unfortunate, it won't cast a shadow on the 2009 Toronto boat show, promises Linda Waddell, vice-president of Northern Shows for the National Marine Manufacturers Association and former manager of the Toronto show.

"We're in a sold-out situation as always," she says, "with product in every square foot of space that we're allowed to sell product in. And we have the same number of exhibitors as last year, with over 1,500 boats."

The "situation with Angus," she says, "is very isolated to that dealer's business. It's not at all something we expect to see in other parts of the industry."

Waddell points out that the lines Angus offered have been picked up by other dealers.

One of those is Crate Marine Sales, based in Keswick, which will be selling Cruisers Yachts for the first time at this year's show.

"We're down there with more boats than ever," says salesman Peter Wilson. "We have 20 boats on display from 19 feet to 55 feet, from $25,000 to about $1.5 million. Not only that, we've got five boats over $1 million and you know, they're there to be sold.

"And so far, the interest we've seen for the upcoming show is no different from any other show."

According to company owner Greg Crate, "70 per cent of Crate's sales for the year happen at the boat show."

Typically, the percentage of dealers' annual sales at the show ranges from 45 per cent to 75 per cent, says NMMA vice-president Waddell. She's hoping sales will hold up this year, but admits that dealers are making adjustments.

"There are more entry level boats this year," she says, "more fishing boats, small sailboats, canoes and kayaks. And more incentives for small-boat packages and low monthly payments."

But it's nothing similar to what's happening in the U.S., she says.

According to the monthly report of marine industry analyst Mike Derrett in December, "industry business in the U.S. is probably down to at least 50 per cent of 2007 levels."

He quotes a colleague who visited the Fort Lauderdale Boat Show in October: "The U.S. boating industry is in a state of shock at the severity and speed of the downturn in sales. Most current reports from the Fort Lauderdale show were of year-to-date sales down by 40 per cent to 50 per cent."

Adelkind, of Angus Yachts, says that by October, people were saying, "it's going to be a bloodbath in the U.S. By next spring of '09, 40 per cent of all dealerships will be gone."

A major part of the problem, he says, is that "the wholesale commercial lending business," the so-called "floor planning" business that underwrites the inventory, is in dire straits.

Here in Canada, however, there's no doom and gloom, says Waddell. The banks are still lending, she says, and "dealers are smart about watching their inventory levels and smart about cutting expenses. As with most industries, boat manufacturers and dealers are adjusting to the economic environment."

But there's another factor that may keep the boating industry afloat in Canada, at least in Ontario.

"Boaters here are very passionate about being on the water," Waddell says, hopefully.

"They're not going to give it up. They may make adjustments in their habits but as long as they can afford discretionary dollars, and as long as the industry is offering incentives and marketing to those customers, it's still going to be a big part of people's lives."

"People continue to boat," he says, "and to keep their boats at marinas. Overall, we don't see a major disaster area in marinas. Slips will be occupied and operators probably expect to hold their own."

He adds, "Now, 2008 is not 2009. Operators are aware of the economy and most are holding their prices where they were before."

As for the dealers, he predicts, "Dealers will see some decline. But I don't think they're going to be the disaster that's in the U.S. No doubt that credit is going to be tighter and more difficult to get, but good operators continue to get credit. GE Capital and several of the banks have confirmed that they're still open for business and looking for business."

Even Adelkind, who watched his own Angus Yachts sink out of sight last month, is cautiously optimistic.

He's opening a new boat brokerage business, Yacht Pro, and will be at the boat show, "showing my face, handing out cards."

He predicts, "The biggest thing you're going to see at the boat show is sales and incentives: free auto pilot, free GPS, free gear. Or, `we're going to drop the price. We're going to use '08 prices.'"

Margins – typically around 15 to 25 per cent for sailboats and 40 to 50 per cent for powerboats – are going to go down, he suggests.

"Dealers are going to do anything and everything in their power to try to get people to put their hands in their pockets, but it's a real juggling act to try to make money."

Quality luxury boats, he says, like expensive homes in Rosedale or the Bridle Path, "are still worth plenty. And while they may not sell instantly or for big money, they're real property.

"They're not exactly holding their value but they're not going to be given away."

All in all, Adelkind says with some relish, "It's going to be a fascinating show."

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